Testing the expectations hypothesis when interest rates are near integrated

Journal of Banking and Finance

Volumn 33, Issue 5, 2009, Pages 934-943

  Beechey, Meredith ^a   Hjalmarsson, Erik ^a   Österholm, Pär ^b  

^a FEDERAL RESERVE BOARD   (United States)

^b UPPSALA UNIVERSITY   (Sweden)

Author keywords

Bonferroni tests; Cointegration; Expectations hypothesis; Near integration; Term premium

Indexed keywords

EID: 60749085889     PISSN: 03784266     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.jbankfin.2008.10.008     Document Type: Article

References (45)

1. Bansal R., and Yaron A. Risks for the long run: A potential resolution of asset pricing puzzles. Journal of Finance 59 (2004) 1481-1509
2. Boothe P. Interest parity, cointegration, and the term structure in Canada and the United States. Canadian Journal of Economics 24 (1991) 595-603
3. Bremnes H., Gjerde Ø., and Sættem F. Linkages among interest rates in the United States, Germany and Norway. Scandinavian Journal of Economics 103 (2001) 27-145
4. Campbell J.Y., and Shiller R.J. Cointegration and tests of present value models. Journal of Political Economy 95 (1987) 1062-1088
5. Campbell J.Y., and Shiller R.J. Yield spreads and interest rate movements: A bird's eye view. Review of Economic Studies 58 (1991) 495-514
6. Campbell J.Y., and Yogo M. Efficient tests of stock return predictability. Journal of Financial Economics 81 (2006) 27-60
7. Chong B.S., Liu M.-H., and Shrestha K. Monetary transmission via the administered interest rate channels. Journal of Banking and Finance 30 (2006) 1467-1484
8. Cochrane J.H., and Piazzesi M. Bond risk premia. American Economic Review 95 (2005) 138-160
9. Cogley T., and Sargent T.J. Evolving post-World war II US inflation dynamics. NBER Macroeconomics Annual 16 (2001) 331-373
10. Cuthbertson K. The expectations hypothesis of the term structure: The UK interbank market. Economic Journal 106 (1996) 578-592
11. Dai Q., and Singleton K. Expectations puzzles, time-varying risk premia, and affine models of the term structure. Journal of Financial Economics 63 (2002) 415-441
12. De Graeve F., De Jonghe O., and Vander Vennet R. Competition, transmission and bank pricing policies: Evidence from Belgian loan and deposit markets. Journal of Banking and Finance 31 (2007) 259-278
13. Elliott G. On the robustness of cointegration methods when regressors almost have unit roots. Econometrica 66 (1998) 149-158
14. Elliott G., Rothenberg T.J., and Stock J.H. Efficient tests for an autoregressive unit root. Econometrica 64 (1996) 813-836
15. Engle R., and Granger C.W.J. Co-integration and error correction: Representation, estimation, and testing. Econometrica 55 (1987) 251-276
16. Fama E.F., and Bliss R.R. The information in long-maturity forward rates. American Economic Review 77 (1987) 680-692
17. Hall A.D., Anderson H.D., and Granger C.W.J. A cointegration analysis of treasury bill yields. Review of Economics and Statistics 74 (1992) 116-126
18. Hjalmarsson E. Fully modified estimation with nearly integrated regressors. Finance Research Letters 4 (2007) 92-94
19. Hjalmarsson, E., Österholm, P., 2007a. A residual-based cointegration test for near unit root variables. International Finance Discussion Papers 907, Board of Governors of the Federal Reserve System.
20. Hjalmarsson, E., Österholm, P., 2007b. Testing for cointegration using the Johansen methodology when variables are near-integrated. IMF Working Paper 07/141, International Monetary Fund.
21. Homer S., and Sylla R. A History of Interest Rates (1996), Rutgers University Press, New Brunswick
22. Karfakis C.J., and Moschos D.M. Interest rate linkages within the European monetary system: A time series analysis. Journal of Money, Credit and Banking 22 (1990) 388-394
23. Kleimeier S., and Sander H. Expected versus unexpected monetary policy impulses and interest rate pass-through in euro-zone retail banking. Journal of Banking and Finance 30 (2006) 1839-1870
24. Kozicki S., and Tinsley P. What do you expect? Imperfect policy credibility and tests of the expectations hypothesis. Journal of Monetary Economics 52 (2005) 421-447
25. Lanne M. Near unit roots, cointegration, and the term structure of interest rates. Journal of Applied Econometrics 15 (2000) 513-529
26. Lanne M. Near unit root and the relationship between inflation and interest rates: A reexamination of the Fisher effect. Empirical Economics 26 (2001) 357-366
27. Lardic S., and Mignon V. Fractional cointegration and the term structure. Empirical Economics 29 (2004) 723-736
28. Liu M.-H., Margaritis D., and Tourani-Rad A. Monetary policy transparency and pass-through of retail interest rates. Journal of Banking and Finance 32 (2008) 501-511
29. MacDonald R., and Speight A.E.H. The term structure of interest rates under rational expectations: Some international evidence. Applied Financial Economics 1 (1991) 211-221
30. Miron J.A. Pitfalls and opportunities: What macroeconomists should know about unit roots: Comment. NBER Macroeconomics Annual 6 (1991) 211-218
31. Newey W.K., and West K.D. A simple, positive semi-definite, heteroskedasticity and autocorrelation consistent covariance matrix. Econometrica 55 (1987) 703-708
32. Nicolau J. Stationary processes that look like random walks - The bounded random walk process in discrete and continuous time. Econometric Theory 18 (2002) 99-118
33. Phillips P.C.B. Regression theory for near-integrated time series. Econometrica 56 (1988) 1021-1043
34. Phillips P.C.B., and Hansen B. Statistical inference in instrumental variables regression with I(1) processes. Review of Economic Studies 57 (1990) 99-125
35. Ruge-Murcia F.J. The expectations hypothesis of the term structure when interest rates are close to zero. Journal of Monetary Economics 53 (2006) 1409-1424
36. Saikkonen P. Asymptotically efficient estimation of cointegrating regressions. Econometric Theory 7 (1991) 1-21
37. Shea G.S. Benchmarking the expectations hypothesis of the interest-rate term structure: An analysis of cointegration vectors. Journal of Business and Economic Statistics 10 (1992) 347-366
38. Stock J.H. Confidence intervals for the largest autoregressive root in US economic time-series. Journal of Monetary Economics 28 (1991) 435-460
39. Stock, J.H., 1994. Unit roots and trend breaks. In: Engle, R., McFadden, D. (Eds.), Handbook of Econometrics. vol. 4. North Holland, Amsterdam.
40. Stock J.H., and Watson M.W. A simple estimator of the cointegrating vectors in higher order integrated systems. Econometrica 61 (1993) 783-820
41. Svensson L.E.O. Escaping from a liquidity trap and deflation: The foolproof way and others. Journal of Economic Perspectives 17 (2003) 145-166
42. Ueda K. The Bank of Japan's struggle with the zero lower bound on nominal interest rates: Exercises in expectations management. International Finance 8 (2005) 329-350
43. Wallis K. Time series analysis of bounded economic variables. Journal of Time Series Analysis 8 (1987) 115-123
44. Wu J.-L., and Chen S.-L. Mean reversion of interest rates in the Eurocurrency market. Oxford Bulletin of Economics and Statistics 63 (2001) 459-474
45. Zhang H. Treasury yield curves and cointegration. Applied Economics 25 (1993) 361-367